Tuesday, September 30, 2014

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Creative Ways To Finance All Cash Offers

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For those looking to make an all cash offer on a property, but do not have the necessary funds ready available, there are some creative ways of financing the money that are worth considering. NY1's Jill Urban filed the following report.

When buying a home, cash is king.

These days, more all cash offers are being accepted than ever before, leaving many to wonder where all these buyers are getting theirs pots of gold.

"In many cases, an all cash offer isn’t really all cash," says Jason Auerbach from First Choice Loan Services. "While the seller may be receiving a single check at the closing table, there are many creative ways that people are going about in order to make sure that money is there at the closing table and then later is replaced by a traditional mortgage."

Auerbach says there are some very creative ways buyers can actually finance an all cash offer, and he’s seeing it more and more.

"In today's market, we have a lot of people who will get something called a pledged asset loan," Auerbach says. "They borrow against the monies that are already in the bank. They get that at a very low interest rate, it allows them to close quickly, they buy the apartment 'for cash,' and then afterwards they can seek a regular mortgage."

The pledged asset loan has a floating rate that changes monthly, so most get a regular mortgage, because the rate is more stable.

For those buying a home at the same as selling another, it is possible to get a bridge loan.

"A bridge loan is an excellent option for someone who is selling their home and wants to use the cash from that sale in order to buy a new apartment," Auerbach says. "You can generally borrow between 50 and 60 percent of the value of the home that you're selling, and use it to purchase the new home."

Bridge loans, however, are only for a short period of time and have high rates.

Auerbach also says nowadays many people are getting money from parents or other family members to help front the cash.

Then, they are getting a traditional mortgage after the closing to recoup their assets.

For those who have the cash but don’t want to deplete their accounts, there is also something called a "technical refinance."

"The technical refinance is if you buy an apartment for all cash, and you want to quickly reimburse yourself, you can now go back into the market immediately after closing and
get a mortgage," Auerbach says.

So, bottom line, for those that don’t have a pile of cash, but are sick of losing out on apartments to those who do, it may be worth looking into creative ways to finance, which could help make an offer that is right on the money.

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